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HOW THIS IS MONEY CAN HELP

It's only the high-end that often gets tracked

There are first a few important points to bear in mind. The first is that the figures used to describe the 'rise' in value of many of these collectibles often refer only to the very high‑end items.

Since 1994 an index that follows the price of fine wines has risen by almost 1,800 per cent. By contrast, the FTSE 100 has grown by less than 300 per cent.

Yet, a comparison between these two things is unfair.

The wine index — run by The London International Vintners Exchange (or Liv-Ex) — tracks the prices of the most sought-after Bordeaux wines.

You need deep pockets to invest in these; today, a case of 2005 Chateau Lafite Rothschild sets you back £7,750, according to Liv-Ex.

A year ago the same case cost just £5,790, an increase of 33 per cent.

But wines of a lesser vintage may not have seen anywhere near the same appreciation in value.

The FTSE 100, on the other hand, can be bought cheaply by any investor through a tracker fund and pays a dividend yield of 3.5 per cent a year.

An index run by The London International Vintners Exchange (or Liv-Ex) — tracks the prices of the most sought-after Bordeaux wines - but it is only real top-end wines included

50 rare classic cars have risen - but many won't have gone up in value

It goes without saying that even the most expensive bottle of supermarket plonk is probably delicious to drink, but not considered worthy of investment. It's the same in the classic car market.

Over the past five years an index tracking the performance of 50 rare classic cars has risen by 142 per cent (the FTSE 100, by contrast, has risen by about 20 per cent in this time).

However, Dietrich Hatlapa of the Historic Auto Group — which compiles this index — says: 'Not all marques and models have seen the same performance.'

Indeed, many so‑called 'classic' cars will have fallen in value.

He says rarity, production numbers, and competition pedigree all influence price — as do trends and fashions.

'Sports and competition cars have done well in general, whereas limousines and four-door cars have not,' he adds.

Over the past five years an index tracking the performance of 50 rare classic cars has risen by 142 per cent - but many cars will have seen prices stay stagnant or even fall

Remember collectible investments are driven by sentiment

Of course, you could argue the same is true of more conventional investments. Even in a bull market some companies will see share price falls — perhaps because they are not as profitable as they used to be, or face new competition.

But with collectibles the market is driven purely by sentiment, making it harder to second-guess which particular piece of art or classic car will be in demand in future.

Although sentiment can affect the price of stock market investments, this is also tempered by empirical data, be it sales figures, trading statements or annual profits. Gold, wine, art and antiques are often considered safe haven assets.

Demand for such tangible assets — be it gold sovereigns or a case of vintage champagne — tends to increase in times of economic or political uncertainty.

But there's another important factor to bear in mind.

None of these assets — including gold — pays an income to investors. You are simply buying at one price, and hoping to sell it for more.

This makes them ill-suited for those who live off the income their money generates, be it dividend payments or savings interest.

And don't forget the cost of holding them

Many of the comparisons used between wine or car indices and the FTSE conveniently fail to take into account the return investors get from these dividend payments, which make up a substantial portion of the overall returns.

Many people, quite rightly, complain about the cost of fund manager fees, dealing costs or adviser fees. But many dealers in art or wine will take far more substantial commissions.

You will also have to pay to store and insure what you buy. Wine is often held 'in bond', and gold bullion stored by third parties.

Anyone tempted to dabble in these markets also needs to watch out for fraud. Some investors can end up with items of far inferior quality, than they were promised.

Businesses can also go bust, taking people's investments with them.

Be wary of any schemes or 'funds' that purport to invest in the likes of wine, art and stamps. They often have high charges, and you don't have direct ownership.

And there is no equivalent of the Financial Services Compensation Scheme for those buying wine in bond, classic cars to renovate or the works of an upcoming artist.

For this reason, Mr Hatlapa says these markets tend to appeal to enthusiasts who already have knowledge about such assets.

These investments will never be a replacement for pensions or Isas, but they can add a little diversification to your portfolio.

If you buy something you love — be it a work or art or the car of your dreams — it may prove to be a sound long-term investment. But if not, you'll still have it to enjoy.

FUND JARGON BUSTER

The investment industry's world of abbreviations...Acc: Accumulation - any income generated by the fund like dividends or interest is automatically reinvested.Inc: Income - any income generated is distributed by the fund instead of being reinvested. Dis: Distribution - any income generated is distributed by the fund instead of being reinvested. R: Retail - the fund is aimed at ordinary investors. I/Inst: Institutional - the fund is aimed at corporate investors like pension funds. A, B, M, X etc: Different fund houses use letters for different things. Check with them what they stand for. NT/No trail: Some fund houses use this name on clean funds which carry no commissions for financial advisers, supermarkets or brokers, just the fee levied by the fund manager. But other fund houses use different letters - I, D or Y, for example - so you need to find out for yourself which are clean funds. Gr: Stands for gross. GBP/£: Fund denominated in pounds. EUR: Fund denominated in euros. USD/$: Fund denominated in US dollars. Compiled with online stockbroker The Share Centre